SPECIAL REPORT: Shot fired across bow of public-private partnerships

Thursday, May 17, 2007 – The push toward public-private partnerships by the Bush administration received a warning shot from the House Transportation and Infrastructure Committee recently.

A letter sent to governors, state legislators and state transportation officials point-blank told those state leaders that if the public interest is not protected, privatization arrangements will be taken to task in future appropriations legislation.

Transportation and Infrastructure Chairman James Oberstar, D-MN, and Highway and Transit Subcommittee Chairman Peter DeFazio, D-OR, sent the letter on Friday, May 10.

“We write to strongly discourage you from entering into public-private partnership agreements that are not in the long-term public interest in a safe, integrated national transportation system that can meet the needs of the 21st century,” the letter stated.

“We are very pleased that the House committee recognizes the crucial importance of our nation’s highway system. And that they are sending a very appropriate message to state governors about any consideration they may have to auctioning off public resources,” said OOIDA Executive Vice President Todd Spencer.

The letter also cautions that while the Bush administration has “lauded” these arrangements, the Transportation and Infrastructure Committee believes public interest is often left on the sidelines.

“The committee will work to undo any state PPP agreements that do not fully protect the public interest and the integrity of the national system,” the letter stated.

It’s not an empty threat either. The Transportation and Infrastructure Committee is already working on the reauthorization of highway funding set to expire on Oct. 1, 2009.

“If the highway was constructed with federal funds and if federal funds are going to be involved in any maintenance, improvements or expansion of the highway involved in public-private partnerships, Congress is going to want a say in that,” said Jim Berard, director of communications for the House Transportation and Infrastructure Committee.

That involvement could happen sooner rather than later. The letter advised state leaders that the committee could take action against some partnerships in the next highway funding bill.

Oberstar and DeFazio pointed to the recent long-term leases of the Chicago Skyway and the Indiana Toll Road as agreements that concern them greatly.

“These deals make good business sense to the companies that are investing in the projects, but we have serious concerns about whether these transactions offer a net balance of benefits for the American public,” the letter stated.

The letter does not paint all agreements all bad. In fact, the letter acknowledges there may be opportunities that could very well benefit the highway system and protect public interest. But, current partnerships could spoil those opportunities.

“The rush of the administration and some states to embrace PPPs, particularly for long-term leases of existing assets, is already turning public opinion against this form of innovative financing and may hurt future efforts to positively harness private investment for the public good,” the letter states.

The Subcommittee on Highways and Transit tackled the issue of these partnerships in three hearings to date – with another slated for next week. The hearings centered on questions about increased private involvement in infrastructure project development, delivery and financing.

Spencer is slated to testify at the May 24 hearing of the subcommittee.

The Owner-Operator Independent Drivers Association has long cautioned against public-private partnerships and staunchly opposed the long-term lease of the Indiana Toll Road.

“We feel like the citizens of Indiana were basically wronged by this decision on the part of the governor that clearly went against the citizens of Indiana, and what most citizens think would be appropriate in this area,” Spencer said. “And we certainly do not think that U.S. infrastructure should be put up on the auction block for companies from around the world to bid on.”

A cornerstone of OOIDA’s opposition to privatization is that leases and other such deals do not address why states are facing a shortfall of highway funding in the first place.

“Simply pumping more money into that system doesn’t address the core issue that erodes everything else, and that’s diversion of money,” Spencer said.

Spencer will testify to those views and others held by the Association at the hearing next week.